Home Prices Soar in Missoula, Montana
According to the New West, Missoula, Mt., is part of the 31 percent of the country’s housing markets that is actually expanding.
That’s the good news. The bad news is that as Montana mortgage costs rise, it is becoming increasingly difficult to afford a home there.
The 2007 Missoula Housing Report, released by the Missoula Organization of Realtors Thursday, shows the median home price in Missoula continuing to soar — largely driven by the rising cost of land in the metro area.
The median home price within Missoula’s city limits jumped to $205,000 in 2006 compared to $185,000 in 2005. When you add Lolo into that mix, the median home price in 2006 jumps to $206,850 from 2005’s $192,000.
Looking at the records of bare land sales over the past three years, it’s not hard to see from where the majority of that growth stems.
In 2003, the median price for a lot in Missoula was $75,900. In 2006, the median price for a lot in Missoula was $95,000—a 25.2 percent increase.
Meanwhile, the median price in the this segment of the Montana housing market over the same time period was almost parallel—from $165,000 to $205,000 — a 24.2 percent increase.
Mary Marry, the president of the Missoula Organization of Realtors said those land prices are one of the biggest hurdles to housing affordability.
Once you pay up to $95,000 for a lot, when you start actually building a house, “it becomes a challenge,” Marry said.
The number of lots sold has stayed fairly steady over the past three years, hovering around 60 sold per year. In 2006, 63 lots were sold, according to the report.
The cost of land is tied to simple supply and demand: There are fewer and fewer open lots in Missoula — a city that is confined by adjacent public lands or steep slopes where building is near impossible —and so the prices continue to go up as demand for mortgage loans increases.
“Our challenge in Missoula is that there is steady demand for housing, but the supply is limited. There are only so many directions you can go,” Marry said.
The report echoes that sentiment in the summary. It reads:
“Providing new stock for continued strong housing demand is a growing challenge. Land availability and housing affordability contribute to that challenge.”
On the other hand, the lack of land availability is one things that has kept the Missoula market strong as other markets in the country begin to slump.
“Yes, land availability is the primary reason the prices have gone up as much as they have. The other part is that lack of land availablility is what kept us from building when a lot of places in the country did,” said Collin Bangs, a real estate agent and developer in Missoula.
“It artificially kept us from getting into the problems a lot of the rest of the country did. In one way it kind of saved our bacon in the short term but long term, it’s going to be a large problem.”
The report breaks down “affordability” under the terms described by the National Association of Realtors’ Housing Affordability Index, which takes into account local mortgage rates, median price, median family income and home loan terms.
With these calculations, a family would need to make $58,128 per year to afford the median priced home in Missoula. Meanwhile, median income in Missoula, according to data from the federal Department Housing and Urban Development is $37,800 for one person and $43,200 for two people.
The Index for Missoula, thenm is 65 percent, meaning the average family in Missoula has 65 percent of the income required to afford a home loan for the average property in Missoula.
In 2005, the HAI in Missoula was 68 percent. In 2004 it was 82 percent and in 2004, it was 84 percent. To look at it another way, the report breaks down the availability of homes the average Missoulian can afford.
The report concludes that only 11 percent of Missoula County households had the means in 2006 to purchase a median-priced home. The issue of affordable housing has been brought to the forefront of development discussions in Missoula and it’s not something leaders take lightly.
This year, the Missoula Housing Report also tracked migration to Missoula County, which offers perspective on what the demands will look like on the Missoula market in the future.
Total, Missoula County has grown by about 1.7 percent each year since 1990, which compares to the 1.9 percent each year since 1950. The County saw a big boom of net migration in the mid-90s, but since a peak in 1993, has continued to add about 500 persons per year.
According to data in the report from the University of Montana’s Bureau of Business and Economic Research, about 50 percent of that growth comes from people moving into Missoula County from another Montana county, while 25 percent comes from out-of-state residents with previous ties to Montana and the other 25 percent is from new Montana residents moving in.
SOURCE: The New West